A number of activities of potential significance have occurred in the implementation of the Dodd-Frank Act:
Surplus Lines Regulation:
Patient care ombudsmen are sometimes appointed to monitor the care provided to patients of medical facilities that have filed for bankruptcy. Courts, however, weigh a number of factors in determining whether an ombudsman should be appointed, and whether the patients and the facility’s creditors would benefit from the appointment.
On Oct. 28, 2011, the United States Bankruptcy Court for the Eastern District of Virginia issued an opinion with significant ramifications for any holder of a patent license that operates internationally. At issue was an important protection afforded to patent licensees under the United States Bankruptcy Code - § 365(n).
One of the primary fights underlying assumption of an unexpired lease or executory contract has long been over whether any debtor breaches under the agreement are “curable.” Before the 2005 amendments to the Bankruptcy Code, courts were split over whether historic nonmonetary breaches (such as a failure to maintain cash reserves or prescribed hours of operation) undermined a debtor’s ability to assume the lease or contract.
The enforcement of triangular setoffs in bankruptcy, where affiliates set off their claims against the debtor, received another setback in a recent decision in the Lehman bankruptcy cases. See In re Lehman Brothers Inc., No. 08-01420 (JMP) (SIPA), 2011 WL 4553015 (Bankr. S.D.N.Y. Oct.
The House Judiciary Committee recently heard testimony on the benefits and pitfalls of proposed legislation that would change bankruptcy venue rules by imposing limitations on where corporations may file for bankruptcy protection. The hearing came in the wake of a statement by Judiciary Committee Chairman Lamar Smith, R-Texas, in which he asked how Enron had been able to file its bankruptcy case in Manhattan considering that Enron was based in, and had substantially all of its assets and operations in, Texas.
The scenario has become all too familiar in recent years: a borrower defaults on a loan and, when the lender pursues the loan collateral through foreclosure or other proceedings, the borrower files for bankruptcy protection. More often than not, when the lender appears in bankruptcy court to pursue its interest in the collateral, the borrower counterattacks with a host of state law lender liability claims.
The United States Supreme Court recently narrowed the scope of the authority of bankruptcy courts, with potential far-reaching implications on past, present and future bankruptcy matters. The case, Stern v. Marshall, 131 S.Ct. 2594 (2011), began as a dispute between Anna Nicole Smith and the son of her late husband. After several years of litigation and one previous trip to the U.S. Supreme Court, the Court ruled bankruptcy courts lack the authority to enter judgments on counterclaims against a debtor that are based on state law.
Following California-based solar manufacturer Solyndra’s announcement August 31 that it intends to file for bankruptcy, House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Oversight Subcommittee Chairman Cliff Stearns (R-TX) requested more documents from the White House regarding the Department of Energy’s $535 million loan guarantee to the company, the first to be awarded in September 2009. The bankruptcy is likely to intensify congressional criticism of the agency’s loan guarantee program and other renewable energy subsidies.
Following the Second Circuit’s recent precedent in an Enron appeal (also the subject of a Basis Points blog post), Judge Peck of the United States Bankruptcy Court for the Southern District of New York concluded that the redemption of notes prior to maturity was exempt from preference actions under the safe harbor provision of Bankruptcy Code § 546(e). Official Comm. of Unsecured Creditors of Quebecor World (USA) Inc. v. Am. United Life Ins. Co., No. 08-10152 (Bankr. S.D.N.Y. July 27, 2011).